Good SIPP for holding cash?
|Investment | Fixed Interest
Asked by pbru6753, submitted
26 June 2013.
I have an existing SIPP, but am thinking of moving it.
I am trying to find a SIPP which is flexible enough to accept some or all of the investment into cash. I have checked on some of the platform providers websites, but haven't been successful in finding anyone who provides this service. Can you help with the names of some providers please.
Answered by Justin on 23 August 2013
Low cost SIPP providers tend to be good value when you want to hold investments, but awful if you want to hold cash.
This is because cash rates (at the time of writing) are near zero, for no other reason than it's a nice earner for the SIPP providers (usually platforms) concerned. When you hold cash they'll place it on deposit and keep most or all of the interest for themselves. It's an annoying practice, although in fairness interest rates are low at present and maybe charges would have to rise elsewhere to compensate if they stopped making a profit on cash.
The one low cost SIPP provider offering semi decent rates is James Hay via its Modular iSIPP. (costing £180 a year plus up to 0.18% p.a. of investment value), giving access to four cash accounts via Arbuthnot Latham, Cater Allen, Close Brothers and Investec. You can view current rates here, not great but generally a fair bit higher than other low cost SIPPs.
If you want access to any savings account permitted to be held in a pension then you will need to use a more expensive 'bells and whistles' SIPP, for which you can expect to pay upwards of £500 per year.
You could instead choose to invest in 'money market' or 'liquidity' funds. These typically buy bits of paper from other financial institutions promising returns - which is good unless the promises turn out to be hollow, in which case you could lose money (as happened to some of these funds during the credit crunch). While not as safe as using a deposit account (with risk depending on exactly how the fund invests your money) such funds could be worth careful consideration where a competitive deposit account is not available, although returns can still be low after charges.
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